Failed deals caused Egerton’s breakdown
A PAIR of unsuccessful acquisitions and an extremely competitive trading environment led to administrators being appointed to Cheshire-based vehicle recovery firm Egertons in March.
The business, which has since been sold back to the Egerton family via a “pre-pack” administration process for £350,000, had been trading successfully since 1962 and had enjoyed a rapid growth spurt in the run-up to the recession – building a network of 13 recovery bases along the M6 from which it recovered vehicles for organisations like the AA, RAC and Green Flag.
It had attempted further expansion by acquiring Birmingham-based competitor Albany Recovery for £685,000 in April 2007 and £1.2m for Wessex Recovery in June 2010, but both companies sustained heavy losses post-deal and were eventually closed – Albany was wound down in November 2010 and Wessex was placed into liquidation in September 2011, although Egertons Recovery later bought back its assets from the liquidators.
A report by administrators Duff & Phelps states that the failure of both businesses “after substantial financial investment…placed considerable strain on the company’s finances”.
This was exacerbated last year by rising fuel costs, and in 2011 Egertons Recovery lost around £3m worth of contracts to competitors – including its Green Flag deal worth around £1.4m.
It also had high levels of fixed costs, including a vehicle fleet which was largely obtained under hire purchase deals, making downsizing difficult. Some redundancies were made and tax payments deferred, while directors stopped taking salaries and arranged new personal loans on properties. The business continued to struggle to pay debts, though, leading to its principal lender – invoice discounting firm Positive Cash Flow Finance – eventually appointing administrators.
A temporary stay of execution was provided in an attempt to find new sources of equity and three bids were made to pick up the company through an administration process, but the only solid offer (and the highest sum bid) came from its existing management team through a new vehicle, Egertons Recovery Group Ltd.
It will continue to collect book debts for Positive Cash Flow owed to the previous business. Administrators have said that there is also likely to be enough of a surplus to offer a partial payment to unsecured creditors owed £2.6m – £1.1m of which is owed to trade creditors and £1.5m to HMRC.
However, it added that “the quantum of this distribution is currently uncertain and is dependent on future asset realisations and the cost of the administration”. The company’s main asset is its HQ – a freehold property that has been valued at £450,000, which is still being occupied by Egertons Recovery Group until a sale is agreed.
